Do you plan to trade forex anytime soon? Just like anything in this world, there is no such thing as a one size fits all secret tip to make you successful in this venture. But, it wouldn’t hurt to know the most common mistakes that any beginner commits, mistakes that you should avoid at all costs.
Several forex companies have promotions which promise you to become richer in no time. Never believe them. Yes, some people really get richer in trading forex yet there are some who make more cash selling houses. As expected, richness in both cases doesn’t happen overnight. It even takes years to accumulate the right experience and make forex trading a full time lucrative job.
Intuitive Trading Decisions
If there is one thing you have to remember, it is the fact that the forex market is not a casino. But, there are novice traders who think that it is. They merely use their intuition in making decisions. Although there are times when it can lead to success, ultimately, the trader will end up losing money and failing along the way.
The biggest mistake trigger and main enemy of any novice trader is none other than his emotions. As you watch the decrease or increase of deposit, you can lose your mind and take hasty steps just to stop losing money or getting more. It is a big no-no. Decision making must be well reasoned and not based on emotions alone. So as to avoid increasing tension, put a stop-loss and take-profit and leave the market alone. Avoid monitoring it day in and day out.
Trading Against the Latest Trend
Like what they always say, trend is your friend. You could always try catching short term movements in price or price correction. But the truth us, you can make a bigger and more regular profit when you keep track of long term price movements and buy or sell in the direction of the trend. Keep an eye on the international price movements over long time frames and only after that you should open trades on the minor time frames.
Holding Your Losses for a Long Time
Unlike beginners, pro forex traders can identify when a loss trend will not reverse. A disciplined trader will not hope for the better and will take a loss instead and simply close the order. Most of the time, life teaches you a lesson and you have to learn from them and choose to move on.
Excessive Open Positions
When you choose to open a lot of positions, there will be lesser chances for you to response to all events quickly and properly. It is difficult to focus on every position when you get a lot of information.
After the release of important data, prices tend to move tens or hundreds of pips in both direction in a matter of seconds or minutes. The movement is too quick that trading right is physically impossible. The market is too feverish, jumping up and down. The forex brokers reduce liquidity and widen spreads, entailing high loss and risks probability. It is recommended for beginners to avoid trading during the release of vital economic news.